Advice please with a Clerical Medical Distribution bond.

TUVOK

I have held a Clerical Medical Distribution bond since 2001 with a opening value of £20K, it current value is about £24.8K, I have taken several with drawls of £1K, on the last with drawl I had for the first time pay tax on the with drawl.

I would welcome advice on a few issues with the bond.
1. Is it a good investment to continue to hold?
2. If I 'cash' the bond in? will I be paying 20% tax on the with drawl amount or more?
3. I am in my late 70's and I am trying to get my affairs in order, so would it be a good idea to close the bond now as neither of my son's are financially interested in any thing like this and most probably it would be an unwelcome matter upon my death.

I do realise I am asking about several issues, but appreciate any help/advice on all or one.
Thank you.

Notepad_Phil

1. Not able to comment on your specific bond, but most investment bonds don't have a great reputation.
2. I'm not an expert, but if it's an onshore bond and covered by https://techzone.abrdn.com/anon/public/investment/Taxation-of-bonds then it gets added to your other income and so could have higher rates of tax placed on ir, but there is the opportunity to top-slice it to get back to a lower rate of tax.
3. If it's anything like the offshore bond that I had to help Mrs Notepad with, then yes, personally I would close it as soon as possible if your sons are not greatly interested in dealing with financial companies and having to work out how best to take the money out and deal with  tax etc - hopefully you'll be around for many years to come, so if you've got the ISA headroom available, then maybe put the proceeds into a stocks & shares ISA and buy a suitable global fund which are much easier to deal with when the time comes.

dunstonh

1. Is it a good investment to continue to hold?

Is it the clerical medical onshore investment bond or the offshore investment bond?
CM have a range of investment funds. Distribution is just one of the funds available.    High yielding funds/distribution funds have been off the boil for most of the last 15 years.

The tax wrapper itself was good until the dividend allowance of £2000 and dividend tax of 7.5%, and high CGT allowance was created.   Then it went out of favour.  Now it is coming back into favour with 8.75% dividend tax, £500 allowance and £3000 CGT allowance.   Investment platforms that don't currently have an onshore or offshore bond on them are currently rushing to get them back on because of the tax changes.

2. If I 'cash' the bond in? will I be paying 20% tax on the with drawl amount or more?

The onshore version is treated as basic rate tax paid.  So, only if you go into higher rate tax with the chargeable gain would there be any further tax.   Your recent taxation, suggests you did go into higher rate tax (unless you forgot top slicing relief and incorrectly declared it or its an offshore bond).

3. I am in my late 70's and I am trying to get my affairs in order, so would it be a good idea to close the bond now as neither of my son's are financially interested in any thing like this and most probably it would be an unwelcome matter upon my death.

On the other hand, investment bonds are not included in any means tests for local authority care.   You could have £1m in an investment bond and the means test cannot include it.

Also, as an insurance policy, it can be assigned to beneficiaries or put in trust.  Its no slower or quicker to deal with (when held normally) than an ISA or GIA.   

TUVOK

My thanks for all three replies, all very informative and most helpful. 
I have a lot of thinking to do.

MSE forum has been so helpful on many aspects over the years, I recommend it to many friends and families as so many people especially re finance have little knowledge or interest.